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| EGYV.OB > SEC Filings for EGYV.OB > Form 10QSB on 28-May-2004 | All Recent SEC Filings |
28-May-2004
Quarterly Report
The following discussion should be read in conjunction with the financialstatements and related notes which are included under Item 1.
Certain statements made in this Quarterly Report on Form 10-QSB areforward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995. Such statements involve known and unknown risks,uncertainties, and other factors that may cause actual results, performance, orachievements of the Company to be materially different from any future results,performance, or achievements expressed or implied by such forward-lookingstatements. Although the Company believes that the expectations reflected insuch forward-looking statements are based upon reasonable assumptions, theCompany's actual results could differ materially from those set forth in theforward-looking statements. Certain factors that might cause such a differenceinclude, but are not limited to, general economic conditions, our ability tocomplete development and then market our products, competitive factors and otherrisk factors as stated in other of our public filings with the Securities andExchange Commission.
This report is for the three and six month periods ended March 31, 2004. Thereader is directed to the Company's Annual Report on Form 10-KSB filing for moreinformation about the Company. Accordingly, this section will primarily discussthe Company's position as of the filing date hereof.
Overview
Energy Visions Inc. (hereafter, the Company or EVI) was formed in 1996, toresearch, develop and commercialize rechargeable battery technologies. TheCompany has several electro chemical technologies and is currently working onthe development and commercialization of the Direct Methanol Fuel Cell (DMFC)and the Nickel Zinc (NiZn) technology.
Costs relating to the DMFC project were, until September 30, 2002, in large partsupported by Alberta Research Council Inc. (ARC). The Company expects to spendsignificant sums upon expanding its battery testing capability. While there canbe no assurance that our business plan for the next year will be successful, thetargeted financings planned for the Company, if successful, are expected tosupport the Company's activities until significant income streams of royaltiesand license fees develop.
In October, 2003, the Company acquired a 49.6% shareholding in Pure Energy Inc.("PEI") which company, through Pure Energy Battery Inc., now named Pure EnergyVisions Inc., owns and operates a technologically advanced battery manufacturingfacility located in Amherst, Nova Scotia which has a capability of making morethan 100,000,000 batteries annually. At the date hereof, the Company owns47,664,961 common shares representing approximately 49.6% of PEI which isadministered by a 3 person Board of Directors of which the Company can currentlynominate one director only.
Comparative Disclosure
During the quarter ended March 31, 2004, the Company was still a developmentstage company and has yet to achieve significant revenues. There were revenuesof approximately $3,000 for both the three-month and six month periods endedMarch 31, 2004, and none in the prior year. We do not expect significant revenuesources until the Company successfully completes the commercialization of itsrechargeable battery technologies which the Company currently expects to achievein calendar 2004.
The Company's expenses in the quarters ended March 31, 2004 and 2003 totaledapproximately $261,000 and $294,000, respectively, resulting in a decrease ofapproximately 11.2%. This decrease was the result of a lessened level ofactivity in almost all areas of the Company's expenditures.
ENERGY VISIONS INC. AND SUBSIDIARIES
FORM 10-QSB
March 31, 2004
One of the more significant costs included above are the Company's research anddevelopment costs approximating $52,000 in the current quarter, representing anapproximately 32% decrease compared to the prior year's comparative value ofapproximately $77,000. The Company's research and development expenses in thesix month periods ended March 31, 2004 and 2003 totaled approximately $100,000and $152,000, resulting in a decrease of approximately 34%. The Company'sresearch and development activities are currently primarily conducted inCalgary, Alberta, and the values reflect a generally reduced level of researchand development activities in that facility. Professional fees decreasedsignificantly from approximately $72,000 for the quarter ended March 31, 2003,to approximately $41,000 in 2004, a decrease of approximately 43%. In the sixmonth periods, such expenses decreased by approximately 75% from approximately$167,000 in 2003 to approximately $42,000 in 2004. The Company incurred onlymodest professional fees in the current year. The six month values include acredit adjustment of approximately $34,000 in respect of a fee settlement withthe Company's prior auditors and a lower than anticipated September 2003 auditfee. General and administrative expenses were approximately $122,000 in each ofthe quarters ended March 31, 2004 and 2003; however, the 2004 value includes anon-cash compensation charge in the amount of approximately $45,000 in respectof prior issued stock options.
During the three month period ended March 31, 2003, the Company received $95,000in proceeds from the sale of Astris options to an unrelated third party. Nosimilar transaction occurred in the current year's comparable period.
Interest and financing costs increased by approximately $26,000 or approximately200% in the current quarter from approximately $13,000 in 2003 to approximately$39,000 in 2004. The increased expenditure primarily relates to interest on aborrowing of Cdn. $1,000,000 from Rabih Holdings Limited in October 2003, usedto acquire common shares of Pure Energy Inc.
The Company reports in its statements of earnings, the Company's equity share ofthe results of 49.6% owned Pure Energy Inc. The Company's share of the PureEnergy Inc. loss in the quarter to March 31, 2004, was approximately $79,000.There is no comparative value in the prior year.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and the results of ouroperations are based upon our consolidated financial statements and the dataused to prepare them. The Company's financial statements have been prepared inaccordance with accounting principles generally accepted in the United States ofAmerica. On an on-going basis, we re-evaluate our judgements and estimatesincluding those related to revenue, bad debts, long-lived assets and incometaxes. We base our estimates and judgements on our historical experience,knowledge of current conditions and our beliefs of what could occur in thefuture considering available information. Actual results may differ from theseestimates under different assumptions or conditions. Our estimates are guided byobserving the following critical accounting policies.
Development Stage Company
The Company is considered to be in the development stage as it devotessubstantially all of its efforts to establishing a new business throughactivities such as financial planning, raising capital and research anddevelopment.
Revenue Recognition
The Company recognizes revenue when services are performed and collectibility isreasonably assured. Additionally, licensing fees are recognized ratably overthe term of the license agreement.
The Company maintains an allowance for doubtful accounts for losses thatmanagement estimates will arise from its customers inability to make requiredpayments or disputes that arose over terms to be met in agreements withcustomers. We make our estimates of the collectibility of our accountsreceivable by analyzing historical bad debts, specific customer creditworthinessand current economic trends.
ENERGY VISIONS INC. AND SUBSIDIARIES
FORM 10-QSB
March 31, 2004
Accounting for Income Taxes
The Company records a valuation allowance to its deferred tax assets to theamount that is more likely than not to be realized. While we consider historicallevels of income, expectations and risks associated with estimates of futuretaxable income and ongoing prudent and feasible tax planning strategies inassessing the need for the valuation allowance, in the event that we determinethat we would be able to realize deferred tax assets in the future in excess ofthe net amount recorded, an adjustment to the deferred tax asset would increaseincome in the period such determination has been made. Likewise, should wedetermine that we would not be able to realize all or part of the net deferredtax asset in the future, an adjustment to the deferred tax asset would becharged against income in the period such determination was made. A 100%valuation allowance in the amount of $2,087,037 has been recorded against ourdeferred tax asset at March 31, 2004. The valuation allowance consistsprincipally of net operating losses previously realized and stock compensationcurrently not deductible. The valuation allowance was necessary because theutilization of such deductions is not reasonably assured since the Company hasnot yet reached profitability.
Valuation of Long-Lived Assets
The Company identifies and records impairment on long-lived assets, when eventsand circumstances indicate that such assets have been impaired. The Companyperiodically evaluates the recoverability of its long-lived assets based onexpected undiscounted cash flows, and recognizes impairment, if any, based onthe expected discounted cash flows. Factors we consider important which couldtrigger an impairment review include the following:
*
Significant negative industry trends;
*
Significant adverse change in the extent or manner of its use;
*
Current period operating or cash flow loss combined with a history of operatingor cash flow losses.
During fiscal year 2002, the Company recorded impairment losses related to itslicense and technology costs of $253,480 and impairment losses related to itsproperty and equipment of $272,589.
Liquidity
At March 31, 2004, the Company had $5,843 in cash on hand and a working capitaldeficiency of approximately $1,371,000. Such working capital deficiency includesapproximately $1,166,000 owed to the Company's President and Chief ExecutiveOfficer, to a company controlled by this individual and the spouse of theCompany's President and Chief Executive Officer.
The Company currently estimates it will have approximately $50,000 in monthlyexpenses and no revenues. Anticipated cash receipts are insufficient to servicethe Company's cash needs. Accordingly, the Company has insufficient cash tocontinue its operations and will be dependent upon its creditors until newfinancing arrangements are completed.
The Company is in need of new capital to support its growth and technology,research and development costs, and to fund expanded capital facilities. EVI'smanagement is actively seeking new debt and equity funding. There can be noassurance that such financings will be successful and if it is not successfulthe Company will have to cease all operations.
ENERGY VISIONS INC. AND SUBSIDIARIES
FORM 10-QSB
March 31, 2004
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